Canopy Growth Corp. is shaking up its Acreage Holdings Inc. acquisition deal because of “broader market and economic factors.”
Smiths Falls, Ont.-based Canopy signed an agreement in April 2019 to takeover the New York company if cannabis production and sale became federally legal in the United States.
The deal would help Canopy deepen its international opportunities and involved the company agreeing to pay 0.5818 of its share for each Acreage share.
As part of the changes, which include an up-front payment for Acreage shareholders and certain convertible security holders totalling US$37.5 million or about 30 cents US per share, Acreage shareholders will receive 0.7 of a fixed share and 0.3 of a floating share for each Acreage share they hold.
Once the cannabis laws change in the U.S., Canopy has agreed to swap 0.3048 of a Canopy share for each fixed Acreage share. Canopy will also have the option to buy the floating Acreage shares for a price equal to their 30-day volume weighted average trading price, subject to a minimum of US$6.41 per share, payable in either cash or shares at Canopy’s option.
Canopy, which is behind brands including Tweed and Tokyo Smoke, said in a release that the new deal will better align with current economic conditions and “give Acreage shareholders the ability to participate in upside potential.”
“The United States is going to be a core market for Canopy Growth and this new agreement solidifies our path forward with Acreage,” chief executive David Klein said in a statement.
“I am excited to bring our relationship with Acreage back to centre stage in our U.S. strategy and look forward to a time when the laws in the United States permit us to finalize this transaction as we march toward bringing our exciting beverage products to the US.”
Acreage is behind the Botanist, Live Resin Project, Natural Wonder and Prime brands and has former prime minister Brian Mulroney on its board.
In connection with the new deal, Acreage chief executive Kevin Murphy announced he was resigning as chief executive, but will continue as chairman of the board of directors.
Director Bill Van Faasen, former chairman, CEO and president of the Blue Cross Blue Shield of Massachusetts, will serve as Acreage’s interim CEO.
The shuffle comes after Canopy laid off 85 full-time workers and closed its indoor facility in Yorkton, Sask., to align its production in Canada with market conditions in April.
Canopy also ended farming in Springfield, N.Y., cultivation work at a facility in Colombia and operations in South Africa and Lesotho.
Prior to those cuts, the company had laid off 500 employees, closed some of its greenhouses and took writedowns of between $700 million and $800 million at the start of the year as it dealt with profitability challenges.
This report by The Canadian Press was first published June 25, 2020.
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Tara Deschamps, The Canadian Press